Retailing 8th Edition by Patrick M. Dunne – Test Bank

Complete Test Bank With Answers

 

 

Sample Questions Posted Below

 

CHAPTER 5—MANAGING THE SUPPLY CHAIN

MULTIPLE CHOICE

1. 2. 3. 4. A _____ is defined as a set of institutions that moves goods from the point of production to the point of

consumption.

a. retail system

b. transporter

c. supply chain

d. franchisee

e. value chain

ANS: C PTS: 1 REF: p. 184-185 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Concerning the “supply chain,” which of the following statements is true?

a. Supply chains are so closely associated with high prices that many retailers are dropping

out of supply chains and performing the functions themselves.

b. Most supply chains will disappear within the next decade, as all merchandise will soon be

purchased directly from manufacturers.

c. Supply chains do not aid the retailer in providing possession, form, or place utility, for the

final consumer.

d. Profits sufficient for survival and growth will be difficult for a retailer to achieve without

being part of an efficient, effective supply chain.

e. Supply chains seldom change over time.

ANS: D PTS: 1 REF: p. 185-186 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

The supply chain, or channel, is affected by five external forces: consumer behavior, the legal and

ethical environment, the socioeconomic environment, the technological environment, and:

a. the natural or physical environment.

b. competitive behavior.

c. personal relationships.

d. channel function management.

e. new government regulations.

ANS: B PTS: 1 REF: p. 186 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Which of the following external forces does NOT have a major influence on the supply chain?

a. Technological environment

b. Employee morale

c. Legal environment

d. Consumers

e. Behavior of competitors

ANS: B PTS: 1 REF: p. 186 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension5. 6. 7. 8. 9. The eight marketing functions are buying, selling, storing, transporting, information gathering,

financing, risk taking, and:

a. managing.

b. product development.

c. facilitating.

d. designing.

e. sorting.

ANS: E PTS: 1 REF: p. 187 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Each of the following is a marketing function that retailers perform EXCEPT:

a. pricing.

b. information gathering.

c. selling.

d. financing.

e. storing.

ANS: A PTS: 1 REF: p. 187 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

_____ involves breaking down heterogeneous materials or product into more homogenous groups.

a. Organizing

b. Classifying

c. Synthesizing

d. Sorting

e. Grouping

ANS: D PTS: 1 REF: p. 187 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Marketing institutions are classified into two categories:

a. b. c. d. e. those that take title to the goods and those that do not.

those that are paid a flat fee and those that work on commission.

those that take possession and those that do not.

those that are profitable and those that are not.

those with high margin and those with low margin.

ANS: A PTS: 1 REF: p. 190 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

The major difference between primary marketing institutions and facilitating marketing institutions is

that facilitating members:

a. b. c. d. e. do not take title to the goods.

are paid only a percentage of profits made.

take title to the goods.

perform all eight functions in all channels situations.

are always paid by the manufacturer.

ANS: A PTS: 1 REF: p. 190 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills10. 11. 12. 13. 14. KEY: Bloom’s: Comprehension

There are three types of primary marketing institutions: manufacturers, retailers and:

a. transporters.

b. agents/brokers.

c. wholesalers.

d. advertisers.

e. warehouses.

ANS: C PTS: 1 REF: p. 190 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Which one of the following institutions involved in a supply chain would take title to the goods it is

dealing with?

a. Trucking company

b. Insurance company

c. Market researcher

d. Retailer

e. Public warehouse

ANS: D PTS: 1 REF: p. 191 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Application

Facilitating institutions may best be described as specialists that:

a. b. c. d. e. while not taking title, still perform marketing functions for supply chain members.

create new markets for the manufacturer.

serve as the supply chain leaders.

perform functions supply chain members cannot legally perform.

eliminate conflict from the supply chain.

ANS: A PTS: 1 REF: p. 192 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

The major facilitating institution involved in storage is the:

a. private warehouse.

b. in-transit warehouse.

c. demand collection channel.

d. contract warehouse.

e. public warehouse.

ANS: E PTS: 1 REF: p. 194 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Retailers frequently use _____ for short-term loans to fund working-capital requirements.

a. commercial banks

b. factors

c. e-tailing brokers

d. stock and commodity exchanges

e. venture-capital firms

ANS: B PTS: 1 REF: p. 195 OBJ: LO 5-115. 16. 17. 18. 19. STA: MBA: Operations skills KEY: Bloom’s: Comprehension

LOC: MBA: Operations skills

_____ are primarily used by retailers starting a new operation or format.

a. Factors

b. Merchant banks

c. Stock and commodity exchanges

d. Venture-capital firms

e. Insurance firms

ANS: D PTS: 1 REF: p. 195 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

There are actually three strategy decisions to be made when designing an efficient and competitive

supply chain: supply chain length, width, and:

a. convenience.

b. depth.

c. organization.

d. type.

e. control.

ANS: E PTS: 1 REF: p. 195 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

A(n) ______occurs when the manufacturers sell their goods directly to the final consumer.

a. supply chain width

b. selective distribution channel

c. direct supply chain

d. exclusive distribution channel

e. indirect supply chain

ANS: C PTS: 1 REF: p. 195 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

A(n) _____ supply chain is the channel that results once independent channel members are added

between the manufacturer and the consumer.

a. direct

b. indirect

c. localized

d. undiverted

e. limited

ANS: B PTS: 1 REF: p. 196 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

When all possible retailers are used in a trading area, the channel strategy is termed:

a. exclusive.

b. intensive.

c. selective.

d. partial coverage.

e. pull coverage.ANS: B PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

20. Selective distribution:

a. means that all possible retailers are used to reach the target market.

b. means only one retailer is used in the trading area.

c. means that a smaller number of retailers are used to reach the target market.

d. is associated with the distribution of convenience goods.

e. is identified with specialty goods.

ANS: C PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

21. Exclusive distribution:

a. means only one retailer is used in the trading area.

b. means that a smaller number of retailers are used to reach the target market.

c. means that all possible retailers are used to reach the target market.

d. is associated with the distribution of convenience goods.

e. is associated with shopping goods.

22. 23. 24. ANS: A PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Although there are exceptions, as a general rule _____ distribution is associated with _____ goods.

a. intensive; shopping

b. intensive; convenience

c. selective; specialty

d. selective; luxury

e. selective; convenience

ANS: B PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Although there are exceptions, as a general rule _____ distribution is associated with _____ goods.

a. intensive; shopping

b. intensive; specialty

c. selective; specialty

d. selective; shopping

e. selective; convenience

ANS: D PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Although there are exceptions, as a general rule _____ distribution is associated with _____ goods.

a. intensive; shopping

b. selective; convenience

c. selective; specialty

d. exclusive; shopping

e. exclusive; specialty25. 26. 27. 28. 29. ANS: E PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Items for which are frequently purchased and the consumer is not willing to spend a great deal of effort

to purchase are known as:

a. shopping goods.

b. industrial goods.

c. convenience goods.

d. raw materials.

e. specialty goods.

ANS: C PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Usually high-prestige branded products that the consumer expressly seeks out, such as Rolex watches,

are known as:

a. shopping goods.

b. industrial goods.

c. convenience goods.

d. raw materials.

e. specialty goods.

ANS: E PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

A supply chain in which each member is loosely aligned with the others is a(n):

a. modified channel.

b. unadministered channel.

c. conventional marketing channel.

d. corporate marketing channel.

e. contractual marketing channel.

ANS: C PTS: 1 REF: p. 198 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Identify the incorrect statement about the conventional marketing channel.

a. b. c. d. e. It is historically predominant in the United States.

It is a sloppy and inefficient method of conducting business.

It fosters intense negotiations within each pair of institutions in the supply chain.

Its members are able to divide the marketing functions among all the participants.

It has been on the decline in the United States since the early 1950s.

ANS: D PTS: 1 REF: p. 198 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Vertical marketing channels attempt to:

a. b. c. d. increase channel effectiveness but not channel efficiency.

minimize the suboptimization of the channel.

increase channel efficiency while minimizing channel effectiveness.

maximize the suboptimization of the channel.30. 31. 32. 33. 34. e. coordinate activities among retailers.

ANS: B PTS: 1 REF: p. 199 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Identify the correct statement about quick response (QR) systems.

a. b. c. d. They are developed by conventional channel members.

They are also known as SKU systems.

These systems are different despite the similar names adopted by various retail industries.

They are designed to obtain real-time information on consumers’ actions by capturing

ECR data at point-of-purchase terminals.

e. The information obtained is used to develop new or modified products, manage channel-

wide inventory levels, and lower total channel costs.

ANS: E PTS: 1 REF: p. 199 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Application

Vertical marketing channels are typically classified into the following three categories:

a. contractual, administered, and corporate.

b. cooperatives, owned, and voluntary.

c. wholesaler-sponsored, retailer-sponsored, and franchised.

d. vertical, horizontal, and interfaced.

e. facilitating, primary, and conventional.

ANS: A PTS: 1 REF: p. 199 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

What type of vertical marketing channel has a well established authority structure?

a. Franchise system

b. Contractual vertical marketing system

c. Conventional marketing system

d. Corporate vertical marketing systems

e. Wholesaler-sponsored voluntary group

ANS: D PTS: 1 REF: p. 199 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

An attempt by a wholesaler to preserve a market for its products by strengthening the retailers that it

sells to is an example of what type of channel arrangement?

a. Retailer-owned cooperative

b. Wholesaler-sponsored voluntary group

c. Corporate system

d. Retail-sponsored marketing system

e. Franchised retail program

ANS: B PTS: 1 REF: p. 200 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Application

TrueValue, Ace, and Handy Hardware are all examples of a(n):

a. retailer-owned cooperative.35. 36. 37. 38. b. contractual vertical marketing system.

c. wholesaler-sponsored voluntary group.

d. independent retailer.

e. franchisee.

ANS: A PTS: 1 REF: p. 201 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

A(n) _____ is a type of contractual vertical marketing channel that is actually a form of licensing.

a. retailer-owned cooperative

b. conventional marketing channel

c. franchise

d. wholesaler-sponsored voluntary group

e. independent retailer

ANS: C PTS: 1 REF: p. 202 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Sylvan Learning, The UPS Store, AAMCO Transmissions, H&R Block, and Lawn Doctor are

examples of what kind of vertical marketing channel?

a. Wholesaler-sponsored voluntary group

b. Contractual channel system

c. Administered system

d. Retailer-owned cooperative

e. Conventional marketing system

ANS: B PTS: 1 REF: p. 202-203 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Analysis

A(n)_______ vertical marketing channel exists when one of the members takes the initiative to

manage the channel.

a. administered

b. allocated

c. conventional

d. concentrated

e. concentric

ANS: A PTS: 1 REF: p. 204 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

The three concepts of interorganizational management that a retail executive needs to understand are

dependency, _____, and conflict.

a. trouble-shooting

b. interorganizational transfers

c. power

d. chain of command

e. personalities

ANS: C PTS: 1 REF: p. 206 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge39. 40. 41. 42. 43. Sun Fashions offered to display Shark Sportswear’s new line of swimwear at the entrance of its store if

Shark pays 50 percent of the advertising expenses for Sun Fashions’ Spring/Summer Catalog. Sun

Fashions is employing which type of power?

a. Reward power

b. Traffic power

c. Referent power

d. Legitimate power

e. Expertise power

ANS: A PTS: 1 REF: p. 207 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Application

Manufacturers usually listen to a retailer’s statements about the introduction of new products because

retailers are often more knowledgeable about how their consumers will react. Manufacturers

understand that retailers possess what type of power in this example?

a. Legitimate

b. Expertise

c. Knowledge-based

d. Reward

e. Referent

ANS: B PTS: 1 REF: p. 207 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

_____ is power derived from one channel member’s desire to identify with their channel partner.

a. Reward power

b. Expertise power

c. Legitimate power

d. Referent power

e. Coercive power

ANS: D PTS: 1 REF: p. 207 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

An example of coercive power is a manufacturer’s:

a. b. c. d. e. refusal to sell merchandise to any retailer who sells to diverters.

offer to increase the cash discounts if the retailer meets a sales quota.

offer a co-op promotional plan to all retailers in a key city.

payment for a prominent display area in a retailer’s store.

act of sending the retailer a Christmas card without a year-end bonus.

ANS: A PTS: 1 REF: p. 207 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Application

The presence of legitimate power is most easily seen in:

a. retailed-owned cooperatives.

b. franchises.

c. administered vertical marketing channels.

d. dependency.

e. contractual marketing channels.44. 45. 46. 47. 48. ANS: E PTS: 1 REF: p. 207 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

The three main sources of conflict between retailers and their suppliers are:

a. power, control, and interdependency.

b. c. d. e. perceptual incongruity, goal incompatibility, and interdependency.

goal incompatibility, perceptual incongruity, and domain disagreement.

power, control, and domain disagreement.

power, interdependency, and perceptual incongruity.

ANS: C PTS: 1 REF: p. 208 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

_____ occurs when the retailer and supplier have different perceptions of reality.

a. Perceptual incongruity

b. Domain disagreements

c. Goal incompatibility

d. Gray marketing

e. Dual distribution

ANS: A PTS: 1 REF: p. 208 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

A customer visits Best Buy to learn about the different models, their features, and the usage of new

digital cameras. This customer then leaves the store without purchasing the camera from Best Buy and

makes the actual transaction on Amazon.com. This is an example of:

a. diverting.

b. gray marketing.

c. free-riding.

d. goal incompatibility.

e. perceptual incongruity.

ANS: C PTS: 1 REF: p. 210 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Application

_____ occurs when achieving the goals of either the supplier or the retailer would hamper the

performance of the other.

a. Perceptual incongruity

b. Domain disagreements

c. Goal incompatibility

d. Gray marketing

e. Dual Distribution

ANS: C PTS: 1 REF: p. 208 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Prior to pulling its products out of Target, Tupperware made its products available in the giant

retailer’s stores. Independent Tupperware sales representatives complained that this had a “detrimental

effect” on Tupperware parties. This was an example of:49. 50. 51. 52. a. perceptual incongruity.

b. domain disagreements.

c. goal incompatibility.

d. gray marketing.

e. dual distribution.

ANS: E PTS: 1 REF: p. 209 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Application

_____ occur when there is a disagreement about which member of the marketing channel should make

decisions.

a. Perceptual incongruity

b. Domain disagreements

c. Goal incompatibility

d. Gray marketing

e. Dual distribution

ANS: B PTS: 1 REF: p. 209 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

The dominant behavior in successful supply chains is:

a. collaboration.

b. free-riding.

c. coercive power.

d. conflict resolution.

e. solidarity.

ANS: A PTS: 1 REF: p. 210 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

_____ occurs when the retailer trusts the supplier and the supplier trusts the retailer.

a. Solidarity

b. High dollar performance

c. Coercion

d. Mutual trust

e. Relationship marketing

ANS: D PTS: 1 REF: p. 211 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

_____ occurs when both retailer and supplier openly communicate their ideas, concerns, and plans.

a. Mutual trust

b. Two-way communication

c. Solidarity

d. Category management

e. Gray marketing

ANS: B PTS: 1 REF: p. 211 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge53. _____ exists when a high value is placed on the relationship between a supplier and retailer.

a. Mutual trust

b. Two-way communication

c. Solidarity

d. Category management

e. Gray marketing

ANS: C PTS: 1 REF: p. 212 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

TRUE/FALSE

1. 2. 3. 4. 5. 6. A supply chain is a set of institutions that moves goods from the point of production to the point of

consumption.

ANS: T PTS: 1 REF: p. 184-185 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Profits sufficient for survival and growth would be difficult, if not impossible, to achieve if the retailer

ignored the supply chain.

ANS: T PTS: 1 REF: p. 185-186 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Once the retailer’s supply chain is developed, it should never be changed.

ANS: F PTS: 1 REF: p. 186 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

External forces affecting channels cannot be completely controlled by the retailer or any other

institution in the supply chain, but they need to be taken into account when retailers make decisions.

ANS: T PTS: 1 REF: p. 186 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Storing involves breaking down heterogeneous products into more homogenous groups.

ANS: T PTS: 1 REF: p. 187 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

The logistics network consists of all firms that are involved in moving physical inventory from initial

source to the retail store.

ANS: T PTS: 1 REF: p. 187 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension7. 8. 9. 10. 11. 12. 13. 14. 15. The key difference between a primary and a facilitating marketing institution relates to whether the

member takes title of goods.

ANS: T PTS: 1 REF: p. 190 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Manufacturers and retailers, but not wholesalers, are primary marketing institutions.

ANS: F PTS: 1 REF: p. 190 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Agents and brokers are two types of primary channel institutions.

ANS: F PTS: 1 REF: p. 190 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

While they never actually take title to the goods, most agents and brokers take physical possession of

the merchandise.

ANS: F PTS: 1 REF: p. 192 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Faster delivery enables the supply chain to have lower warehousing costs.

ANS: T PTS: 1 REF: p. 194 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

A public warehouse is a facility that stores goods for safekeeping for any owner in return for a fee,

usually based upon the dollar value of merchandise stored.

ANS: T PTS: 1 REF: p. 194 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Public warehouses, trucking companies, and banks are examples of facilitating institutions.

ANS: T PTS: 1 REF: p. 194-195 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Insurance firms can make it possible for retailers to have what would be otherwise risky promotions.

ANS: T PTS: 1 REF: p. 195 OBJ: LO 5-1

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Venture-capital firms are primarily used by retailers starting a new operation or format.

ANS: T PTS: 1 REF: p. 195 OBJ: LO 5-116. 17. 18. 19. 20. 21. 22. 23. STA: MBA: Operations skills KEY: Bloom’s: Knowledge

LOC: MBA: Operations skills

An indirect supply chain is a channel that results when independent channel members are added

between the manufacturer and consumer.

ANS: T PTS: 1 REF: p. 196 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

As a general rule, intensive distribution is associated with shopping goods.

ANS: F PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

As a general rule, selective distribution is associated with convenience goods.

ANS: F PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

As a general rule, exclusive distribution is associated with specialty goods.

ANS: T PTS: 1 REF: p. 197 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

The goal of every channel member should be to “minimize the suboptimization” of the supply chain.

ANS: T PTS: 1 REF: p. 198 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

In a conventional marketing channel, every member seeks to maximize its own performance, and has

little or no concern for the overall performance of the total supply chain.

ANS: T PTS: 1 REF: p. 198 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

There are three types of vertical marketing channels: corporate, contractual, and administered.

ANS: T PTS: 1 REF: p. 198 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

It is common for wholesaler-sponsored voluntary groups to offer the retailer both store site and

location analysis as well as assistance in designing the store layout.

ANS: T PTS: 1 REF: p. 200 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension24. 25. 26. 27. 28. 29. 30. 31. 32. A franchise is a form of a vertical marketing channel.

ANS: T PTS: 1 REF: p. 202 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

One advantage of franchising is that the owner of a franchise must give up some freedom in making

business decisions that the owner of a nonfranchised business would normally be allowed to make.

ANS: F PTS: 1 REF: p. 203 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

One disadvantage that a franchisor provides a franchisee is that by borrowing from the franchisor, the

franchisee has access to a lower cost of capital.

ANS: F PTS: 1 REF: p. 203 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Most franchisors normally provide financial assistance to existing franchisees.

ANS: F PTS: 1 REF: p. 204 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Administered vertical marketing channels exist when one member of the channel takes the initiative to

lead the channel by applying the principles of effective interorganizational management.

ANS: T PTS: 1 REF: p. 204 OBJ: LO 5-2

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Retailers that are not part of a contractual channel or corporate channel will probably participate in

different channels since they will need to acquire merchandise from many suppliers.

ANS: T PTS: 1 REF: p. 206 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Interdependency is the major cause of the conflict found in supply chains.

ANS: T PTS: 1 REF: p. 206 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Power is the ability of one channel member to influence the decisions of the other channel members.

ANS: T PTS: 1 REF: p. 206 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

The more dependent the supplier is on the retailer, the less power the retailer has over the supplier.33. 34. 35. 36. 37. 38. 39. 40. ANS: F PTS: 1 REF: p. 206 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

When a manufacturer provides a retailer with a bonus if they exceed their expected sales of the

manufacturer’s products, the manufacturer is using its reward power.

ANS: T PTS: 1 REF: p. 207 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Application

Auto dealers that want to handle BMW’s because of the cars’ status is an example of expertise power.

ANS: F PTS: 1 REF: p. 207 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Application

Only three sources of power (i.e., reward, coercive, and expertise) should be used in any channel

relationship.

ANS: F PTS: 1 REF: p. 207 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

The use of legitimate and coercive power tends to elicit conflict and destroy cooperation.

ANS: T PTS: 1 REF: p. 207 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Even if the channel is well-managed, there will always be some conflict between the channel

members.

ANS: T PTS: 1 REF: p. 208 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Most channels operate without conflict.

ANS: F PTS: 1 REF: p. 208 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

The three major sources of conflict between retailers and their suppliers are: perceptual incongruity,

goal incompatibility and domain disagreements.

ANS: T PTS: 1 REF: p. 208 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Perceptual incongruity occurs when achieving the goals of either the supplier or the retailer would

hamper the performance of the other.

ANS: F PTS: 1 REF: p. 208 OBJ: LO 5-341. 42. 43. 44. 45. 46. 47. 48. STA: MBA: Operations skills KEY: Bloom’s: Comprehension

LOC: MBA: Operations skills

Dual distribution occurs when a manufacturer sells to independent retailers and also through its own

retail outlets.

ANS: T PTS: 1 REF: p. 208 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Domain disagreements occur when there is disagreement about which member of the marketing

channel should lead the channel and make the decisions.

ANS: T PTS: 1 REF: p. 209 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Gray marketing is when counterfeit merchandise flows through unauthorized channels.

ANS: F PTS: 1 REF: p. 209 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Conflict is not always negative; at times, conflict can have the benefit of reminding channel members

of their interdependency on each other and may actually increase channel performance.

ANS: T PTS: 1 REF: p. 210 OBJ: LO 5-3

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Application

A retailer should abandon a supply chain partner at the first sign of trouble.

ANS: F PTS: 1 REF: p. 210 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Channel members must work together with their partners to offer products at appropriate prices. No

one will win if either partner is not honest and fair with the other or with the retail customer.

ANS: T PTS: 1 REF: p. 210 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

By limiting the number of partners for each merchandise line, one can signal greater commitment and

trust to partners, thus building stronger relationships.

ANS: T PTS: 1 REF: p. 210 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

The management of cooperative relations is facilitated by mutual trust, two-way communication, and

solidarity.

ANS: T PTS: 1 REF: p. 211 OBJ: LO 5-449. 50. 51. 52. STA: MBA: Operations skills KEY: Bloom’s: Comprehension

LOC: MBA: Operations skills

Mutual trust occurs when both the retailer and its supplier have faith that each will be truthful and fair

in their dealings with each other.

ANS: T PTS: 1 REF: p. 211 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

Two-way communication is a pathway for resolving disputes which allows the channel relationship to

continue.

ANS: T PTS: 1 REF: p. 211 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Because of the interdependency between the retailer and supplier, two-way communication becomes

necessary to coordinate actions.

ANS: T PTS: 1 REF: p. 211 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Comprehension

Solidarity in a channel exists when a high value is placed on the relationship between a supplier and

retailer.

ANS: T PTS: 1 REF: p. 212 OBJ: LO 5-4

STA: MBA: Operations skills LOC: MBA: Operations skills

KEY: Bloom’s: Knowledge

ESSAY

1. Consider the retailer’s role as a member of a larger supply chain. Why should the retailer view itself as

part of this larger channel?

ANS:

In reality, it is the retailer’s supply chain, rather than its outlet, that competes against other retailers. If

the retailer ignores the supply chain in order to maximize short-run profits, then in the long run the

chain will work against the retailer. If the supply chain overlooks the retailer, then profits sufficient for

survival and growth will vanish. All channels are affected by five external forces: (1) consumer

behavior, (2) competitor behavior, (3) the socioeconomic environment, (4) the technological

environment, and (5) the legal and ethical environment. These forces cannot be completely controlled

by the retailer or any other institution in the supply chain, but they need to be taken into account when

retailers make decisions. Supply-chain or channel structure also depends on the number of tasks or

functions each member is willing to perform. Eight marketing functions must be performed by any

supply chain or channel: buying, selling, storing, transporting, sorting, financing, information

gathering, and risk taking. They cannot be eliminated; however they can be shifted or divided in

differing ways among the different institutions and the consumer in the supply chain. All forms of

retailing were created by rearranging the marketing functions among institutions and consumers. No

member of the channel would want or be able to perform all eight marketing functions entirely. For

this reason, the retailer must view itself as being dependent on other supply-chain members.2. 3. 4. PTS: 1 REF: p. 182-190 OBJ: LO 5-1 STA: MBA: Operations skills

LOC: MBA: Operations skills KEY: Bloom’s: Evaluation

Should facilitating institutions be eliminated from the supply chain? Why or why not?

ANS:

The institutions involved in performing the eight marketing functions are usually broken into two

categories: primary and facilitating. Facilitating marketing institutions are those that do not actually

take title but assist in the marketing process by specializing in the performance of certain functions.

Many institutions facilitate the performance of the marketing functions. Institutions that facilitate the

buying and selling functions in the supply chain include agents and brokers. Marketing

communications agencies facilitate the selling process by designing effective advertisements and

advising management on where and when to place these advertisements. Institutions that facilitate the

transportation function are motor, rail, and air carriers and pipeline and shipping companies. The major

facilitating institution involved in storage is the public warehouse, which stores goods for safekeeping

in return for a fee. A variety of facilitating institutions also help provide information throughout the

supply chain. The role of computer specialists, referred to as channel integrators, in setting up

computer channels for transmitting information is evident throughout the business world. Other

facilitating institutions aid in financing, such as commercial banks, merchant banks, factors, stock and

commodity exchanges, and venture-capital firms. Insurance firms can assume some of the risks in the

channel, insuring inventories, buildings, trucks, equipment and fixtures, and other assets for the retailer

and other primary marketing institutions.

PTS: 1 REF: p. 192-195 OBJ: LO 5-1 STA: MBA: Operations skills

LOC: MBA: Operations skills KEY: Bloom’s: Evaluation

Explain how channel length and channel width can be strategically used by a retailer to position its

offering in the marketplace.

ANS:

Supply-Chain Length: Retailers do not always have a lot of control over their channel length and must

learn to operate as efficiently as possible within an inefficient channel. The desired length is

determined by many customer-based factors such as the size of the customer base, geographical

dispersion, behavior patterns like purchase frequency and average purchase size, and the particular

needs of customers. In many cases, indirect channels are actually cheaper in terms of total costs

involved. The retailer could thus position itself as an economy store exploiting the cost advantage in an

indirect channel.

Supply-Chain Width: Intensive distribution means that all possible retailers are used to reach the target

market. Although there are many exceptions, as a rule, intensive distribution is associated with the

distribution of convenience goods. Selective distribution means that a smaller number of retailers are

used. Selective distribution is associated with shopping goods. Exclusive distribution means only one

retailer is used in the trading area. Exclusive distribution is identified with specialty goods.

PTS: 1 REF: p. 195-197 OBJ: LO 5-2 STA: MBA: Operations skills

LOC: MBA: Operations skills KEY: Bloom’s: Analysis

Explain the key differences between a conventional marketing channel and a vertical marketing

system.

ANS:5. A conventional marketing channel is one in which each member of the supply chain is loosely aligned

with the others and takes a short-term orientation. Each member’s orientation is toward the subsequent

institution in the channel. All the members of the channel focus on their immediate desire to close the

sale or create a transaction. Thus, the conventional marketing channel consists of a series of pairs in

which the members of each pair recognize each other but not necessarily the other components of the

supply chain. The conventional marketing channel is a sloppy and inefficient method of conducting

business. It fosters intense negotiations within each pair of institutions in the supply chain. In addition,

members are unable to see the possibility of shifting or dividing the marketing functions among all the

participants. It is an unproductive method for marketing goods.

Vertical marketing channels are capital-intensive networks of several levels that are professionally

managed and rely on centrally programmed systems to realize the technological, managerial, and

promotional economies of long-term relationships. The basic premise of working as a system is to

operate as close as possible to the 100-percent efficiency level. This is achieved by eliminating the

suboptimization that exists in conventional channels and improving the channel’s performance by

working together. Formerly adversarial relationships between retailers and their suppliers are now

giving way to new vertical channel partnerships that minimize such inefficiencies. Quick response

(QR) systems or efficient consumer response (ECR) systems, which are identical despite the differing

names adopted by various retail industries, are designed to obtain real-time information on consumers’

actions by capturing stockkeeping unit (SKU) data at point-of-purchase terminals and then

transmitting that information through the entire supply chain. This information is used to develop new

or modified products, manage channelwide inventory levels, and lower total channel costs. There are

three types of vertical marketing channels: corporate, contractual, and administered.

PTS: 1 REF: p. 198-199 OBJ: LO 5-2 STA: MBA: Operations skills

LOC: MBA: Operations skills KEY: Bloom’s: Synthesis

Discuss the three types of behaviors and attitudes that facilitate relations to resolve conflict that

inevitably occur in every retail supply chain. Why is collaboration important in channel relations?

ANS:

Collaboration is necessary and beneficial because of the interdependency of retailers and suppliers.

Retailers and suppliers must develop a partnership if they want to deal with each other on a long-term

and continuing basis. Collaboration in channel relations is facilitated by three important types of

behavior and attitude. This is the only way to perform marketing functions effectively and efficiently

for the benefit of the customer. These are mutual trust, two-way communication, and solidarity.

 Mutual Trust: Mutual trust occurs when the retailer trusts the supplier, and the supplier

trusts the retailer. In continuing relations between retailers and suppliers, mutual trust,

which is built on past and present performance between members, is critical. If mutual trust

is present, both parties will tolerate inequities because they know in the long term they will

be fairly treated. When trust exists, it is contagious and allows the channel to grow and

prosper. This occurs because of reciprocity. If a retailer trusts a supplier to do the right

thing and the supplier treats the retailer fairly, then the retailer develops more trust and the

process of mutual trust continues to build.

 Two-Way Communication: Conflict is inevitable in retail supply chains. Consequently,

two-way communication becomes the pathway for resolving disputes and allowing the

channel relationship to continue. Two-way communication occurs when both parties openly

communicate their ideas, concerns, and plans. Because of the interdependency of the

retailer and supplier, two-way communication is necessary to coordinate actions. Disputes

can be resolved by good two-way communication, and this improves trust. Furthermore,

trust facilitates open two-way communication. The process is circular and builds over time. Solidarity: Solidarity exists when a high value is placed on the relationship between a

supplier and a retailer. As trust and two-way communication increase, a higher degree of

solidarity develops. Solidarity results in flexible dealings where adaptations are made as

circumstances change. When solidarity exists, each party will come to the rescue of the

other in times of trouble.

Category management, where an entire category is managed as a unit, is one of the ways collaboration

is used in supply chains today. This involves the simultaneous management of price, promotional

efforts and other elements within the category based ob the firm’s goals, the changing environment and

consumer behavior.

PTS: 1 REF: p. 211-214 OBJ: LO 5-4 STA: MBA: Operations skills

LOC: MBA: Operations skills KEY: Bloom’s: Evaluation